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What Are “Usual and Customary Charges” FCA Violations?

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You may have heard the phrase “usual, customary, and reasonable” with regard to medical charges of all types. Insurance companies often use such guidelines to regulate what they will pay in any given region or location. When it comes to government programs such as Medicaid or Medicare Part D (which applies to prescription drugs), if pharmacies choose to participate in the government health care programs, they are forbidden by law from charging higher prices than the “usual and customary” (U&C) ones paid by the general public.

Medicare is a federal program, while Medicaid is administered by the states. Both sets of governments are entitled to establish maximum reimbursement rates for drugs that require prescriptions. In cases where pharmacies charge persons on government health care programs higher prices for prescription drugs than they charge the general public, it’s possible that allegations of false claims prosecutable under the False Claims Act (FCA) can be brought.

Whistleblowers and Pharmacies: Recent U&C Cases

What pharmacies charge those persons on Medicaid and Medicare Part D for prescription drugs has become increasingly scrutinized for deviations from U&C charges. This scrutiny has only increased since 2009, when the Inspector General of the U.S. Department of Health & Human Services stated that the department would audit retail pharmacy chains for their compliance with the U&C requirements in cases where the chains offered the public certain programs that deeply discounted some medications.

In January, 2017, the U.S. Supreme Court declined to review a case that was decided against Kmart, leaving a whistleblower victory in place. A May, 2016, ruling by the U.S. Court of Appeals for the Seventh Circuit declared that any retail discounts or “club” discounts should have been included in Kmart’s U&C drug pricing reports. The case was brought by a former pharmacist.

Pharmacy discount and “club” programs continue to fall under the eye of regulators. During January of 2017, one qui tam case was unsealed by the federal district court for the Eastern District of Michigan. Adam Rahimi brought a case against Rite Aid Corporation in which it was alleged that the drugstore chain charged Medicare Part D and Medicaid customers more than the U&C costs charged the general public over a ten-year period. The chain’s “Rx Savings Program” was specifically cited. The federal government and various state governments declined to join the case after a five-and-a-half year investigation, but the case is proceeding and is scheduled to begin in court during August, 2017, unless a settlement is reached.

In 2016, the grocery store SuperValu Inc. had whistleblower charges brought against its retail pharmacies. SuperValu’s motion to dismiss allegations brought under the FCA was rejected by an Illinois federal district court. The case is ongoing.

As a general rule, FCA cases can take a significant amount of time to resolve, but the trend in pursuing pharmacies for violating “usual and customary” charges may just be getting started.

Making a difference.

If you think you have the facts needed to bring a whistleblower case, the experienced whistleblower attorneys at the Louthian Law Firm can review your case and help you file the appropriate disclosure statement. Under some circumstances, the government will intervene, or join in your lawsuit.

Your chances of succeeding are greater if your whistleblower claim is substantive, clear, and to the point. Because of this, meeting with a qualified whistleblower attorney can increase your chances of winning. The Louthian Law Firm can help you form your claim so that the government will be more inclined to intervene in your case; government intervention can sometimes increase the chances of recovering reward money. Even if the government decides not to intervene, it could still be a good idea to pursue your case without government involvement. Our strong support system can assist you through every step of the process.

For a free, confidential evaluation of your case, call the Louthian Law Firm today at 1-803-454-1200 or, if you prefer, you can fill out our online contact form.

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